Pound Weakens As May To Reject Barnier's Irish Border Offer

The pound declined against its major counterparts in the European session on Wednesday, trimming its early gains, after a media report showed that U.K. Prime Minister Theresa May would reject Michel Barnier's "improved" offer to solve the Irish border issue, alleging violation of Britain's red lines.

According to The Times, the U.K. has decided to abandon Barnier's offer to solve the Irish border issue.

The U.K. is said to believe that Barnier's plan still treats Northern Ireland as a separate customs jurisdiction from the rest of the UK, it said.

"No side can demand something totally unacceptable from the other, such as an external border between parts of the UK," May said, ahead of meeting other EU leaders in the Austrian city.

The currency was trading higher early in the session, after a data showed that U.K. inflation rate hit a six-month high in August.

Data from the Office for National Statistics showed that consumer price inflation increased unexpectedly to 2.7 percent in August from 2.5 percent in July. This was the highest rate since February. Economists had forecast inflation to ease to 2.4 percent.

The pound dropped to 147.20 against the yen, after rising to more than a 2-month high of 148.54 at 4:30 am ET. The pound is poised to find support around the 146.00 region.

The Bank of Japan kept its ultra-loose monetary policy unchanged, as widely expected.

The policy board of the BoJ decided to purchase government bonds so that the yield of 10-year JGBs will remain at around zero percent.

The pound fell to a 5-day low of 0.8919 against the euro, from a 1-1/2-month high of 0.8861 seen at 4:45 am ET. On the downside, 0.91 is possibly seen as the next support level for the pound.

Data from the European Central Bank showed that the euro area current account surplus decreased in July largely due to a fall in visible trade surplus.

The current account surplus fell to a seasonally adjusted EUR 21 billion in July from EUR 24 billion in June.

Pulling away from near a 6-week high of 1.2775 hit at 7:00 am ET, the pound eased back to 1.2697 against the franc. The next possible support for the pound is seen around the 1.25 level.

The Swiss federal government's expert group raised its growth outlook for 2018 but maintained the estimate for 2019.

The State Secretariat for Economic Affairs said the economy is forecast to grow 2.9 percent this year instead of 2.4 percent projected in June. The outlook for 2019 was retained at 2 percent.

The pound hit a 2-day low of 1.3099 versus the greenback, from more than a 2-month high of 1.3215 touched at 4:30 am ET. If the pound falls further, 1.29 is likely seen as its next support level.